11/23/2022
Table of Contents
According to Zylo data, the average organization spends $65 million on SaaS each year. This makes it critical for businesses to optimize and proactively manage their SaaS portfolios in order to gain control of current investments and spend wisely into the future. As someone who’s been on the sales and procurement side of the negotiation table, Highspot Manager of Global Enterprise Procurement Brittney Linville deeply understands SaaS costs. And she’s learned some tips along the way to drive savings.
Saving money starts with gaining insight into your SaaS stack and spend, but Linville recognizes you also must know how to effectively leverage the data.
“Once you collect the data, you’re probably thinking ‘OK, I have all this data. What do I do with it? This is a lot of information; it’s like a fire hose,’” Linville said in a recent session from our SaaSMe event.
Read on for her key takeaways to collecting and using SaaS data to drive cost savings for your organization, or watch the full episode below.
Tip #1: Access Spend Data for Quick Wins
Because you can’t improve what you don’t know, the first step to realizing SaaS savings involves gathering data. Of course, some data exists in the accounts payable and contract management systems, but you must dig deeper to see the bigger picture.
“You also need to look at your corporate card systems and your expense reports,” Linville said. “Those unofficial channels are going to give you the most opportunity to reduce costs.”
While you may dread browsing expense reports, they provide insight into what your team needs to be effective. Once you uncover SaaS wherever it lurks, Linville noted three sources for quick, money-saving wins:
Multi-Channel Spend
Multi-channel spend occurs when you have an official agreement with the vendor, but users within the company still use their corporate cards or expense the tool individually. Finding multi-channel spend provides an opportunity to consolidate all existing licenses into your company plan, but don’t stop there.
Next, evaluate your plan type to see if adding licenses earns you a volume discount.
“Twenty-five plans with 10 users is much different than one plan with 250 users,” Linville said. “Don’t be afraid to contact the sales reps at those companies and use your economy of scale to drive down costs.”
Then, prevent the problem from happening again by using a SaaS Management Platform that allows you to claim your domain to avoid rogue sign-ups in the future.
Zombie Apps and Low-Dollar Recurring Spend
“Zombie apps are the ones where you’re like, ‘I thought we canceled this,’ but like Carl in The Walking Dead, it just rises up and comes back to attack,” Linville said.
If apps continue to resurface, look for the reason why. Does someone in the company have a need that isn’t being met? Or is it time to send formal communication that you evaluated that specific tool and it should no longer be used?
Also, look for low-dollar recurring spends throughout your organization, then reach out to the people making those transactions. Often, you’ll find someone needed a tool for a short-term project and forgot to cancel it, or didn’t realize it was set to auto-renew.
Cancel zombie or auto-renewing apps to get them off your books and lower your total SaaS volume.
Multiple Users Expensing the Same Tool
Lastly, look for SaaS tools being expensed over and over by people within your organization.
“A lot of times, these are going to be your Grammarly or Canvas of the world, or other individual tools that could have broad application across your business,” Linville said.
Save money by consolidating those licenses into a managed plan with the vendor, and don’t forget to ask for a volume discount.
Tip #2: Consolidate for Your Needs
After making some quick wins, dig deeper into the data to consolidate for your needs. Start by looking for applications with functional overlaps.
“Having multiple vendors for team collaboration or project management is really an opportunity to work with your teams and see if there’s one tool that you can consolidate to as an organization to best meet your needs,” Linville said.
First, gather the requesters together. One team may not even know the other team is using a different project management tool. Talk to your teams about their technical requirements and pain points.
Consider the future, too. You might need your project management tool to integrate with another app you plan to roll out company-wide. Once you evaluate all of those factors, use them to find an app that will work for your company long-term — whether through a formal request for proposal or with an internal vendor comparison.
“My key strategy for when you’re evaluating overlap is to use that as leverage when negotiating pricing with your selected vendor,” Linville said. “These companies want to displace their competitors in the marketplace, and they may be willing to offer discounts in order to do that.”
Tip #3: Leverage Utilization Data to Your Advantage
Whenever you receive a request for new licenses, first evaluate utilization data to see if there are any unused licenses floating around. Deprovision employees no longer using the tool, then reassign their licenses.
“Highspot leverages Zylo data with Okta SSO integration to take a look at who’s utilizing what we purchased and who isn’t,” Linville said.
Alleviate burden on your IT team by using a tool that automatically deprovisions and reissues underutilized licenses in real time.
Tip #4: Understand Pricing Drivers
Before you can reduce cost, you must know what drives cost. To put it simply, the cost for an app is quantity multiplied by unit price. To find that quantity, review order forms and contract data.
Then, project future volume by finding commonalities in who gets access to an app and mapping it to your growth. This helps determine whether you’re in the right plan type for optimal cost savings. For example, you may have purchased a plan when you only had five employees, but your company has increased headcount. You would want to re-evaluate your pricing structure, because as you grow, unit prices may decrease.
Most SaaS falls within three pricing models:
- Per-user pricing: This model may be advantageous if only a select number of people within your organization need access to the software.
- Platform fee: Platform fees help with overall adoption and enablement because they allow you to put everybody in your organization within the platform while alleviating the burden of adding and removing users.
- Consumption-based: While you only pay for what you use in this model, it’s hard to predict pricing. It requires working very closely with stakeholders to figure out how their use case ties to consumption.
Linville offered tips for finding cost savings within each model in her SaaSME session.
Tip #5: Negotiate Like a Pro
Now that you know your data and pricing models, get ready to negotiate like a pro. Remember, it’s a negotiation, not a confrontation. Sellers need to know what a buyer can commit to in order to offer the best discounting, and buyers need to understand the pricing model used.
“Know your trade-offs and your must-haves,” Linville said. “Don’t give away those must-haves, but understand there are some levers you can use to get what you need. For example, would you rather have a lower unit cost, or a lower price cap for increases on your unit costs? Knowing you may need to trade one or the other, make sure you’re indexing on the right thing.”
If you’re requesting a discount, ensure your data backs up the need by leveraging growth or industry benchmarks. And know what you bring to the table to make the discount worth it for the company. Common discounting factors include growth, reference rights, and terms.
- Growth: Leverage your growth to get better pricing over the term.
- Reference rights: Provide a reference or participate in a case study to secure a greater vendor discount.
- Terms: Multi-year agreements will always secure the highest discounts, because that company can rely on you being a customer for a longer period of time.
“What this all boils down to is leveraging data,” Linville said. “Data is the best resource for you to secure better pricing, and the more you have of it, the more effective you can negotiate.”
Want more? Watch Linville’s SaaSMe 2022 session and others on-demand.